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Introduction of IIA CIA Part 3 Exam
The Certified Internal Auditor (CIA) is an advanced professional certification for internal auditors. It is a globally recognized certification and is based on the International Professional Practices Framework (IPPF) of the IIA. The CIA exam consists of three parts. Part 1 covers the foundations of internal auditing, Part 2 covers business knowledge for internal auditing, and Part 3 covers internal audit practices. This article discusses the topic matter covered in Part 3 of the CIA exam. It also provides a sample question and answer to help candidates better prepare for this exam. The IIA CIA part 3 exam dumps are also one of the most complete study guides available. You will learn all the required topics and get a full understanding of them.
NEW QUESTION 30
Which of the following corporate social responsibility strategies is likely to be most effective in minimizing confrontations with influential activists and lobbyists?
- A. Maintain a comprehensive publicity campaign that highlights the organization's efforts.
- B. Increase goodwill through philanthropic activities among stakeholder communities.
- C. Continually evaluate the needs and opinions of all stakeholder groups.
- D. Ensure strict compliance with applicable laws and regulations to avoid incidents.
Answer: C
NEW QUESTION 31
Which one of the following input validation routines is not likely to be appropriate in a real-time operation?
- A. Reasonableness check.
- B. Sequence check
- C. Redundant data check.
- D. Sign check
Answer: B
Explanation:
The program controls listed prescreen or edit data prior to processing, but the sequence check is most likely to be used only in batch processing. A sequence -heck lets to determine that records are in proper order. For example, a payroll input file can be sorted into Social Security number order. A sequence check can then be performed to verify record order. This control would not apply in a real-time operation be :-,use records are not processed sequentially.
NEW QUESTION 32
Listed below are selected line items from the cost-of-quality report for Company B for last month Category:
What is Company B's total prevention and appraisal cost for last month?
- A. US$2,665
- B. US$786
- C. US$1,154
- D. US$1,940
Answer: D
Explanation:
Answer (C) is correct. Prevention costs are incurred to prevent defects from occurring. An example is equipment maintenance. Appraisal costs are incurred to detect defective output during and after the production process. An example is product testing. Thus, total prevention and appraisal cost for the month equals US $1,940 (US$1,154 + US $786).
NEW QUESTION 33
On June 1 of the current year, XYZ Company purchased British pounds for 10,000 euros. It also acquired land for 25,000 euros. At the end year or XYZ Company's fiscal year on December 31, the spot rate for the pound was 1.20 euros. The land had a value of 27,500 euros. XYZ Company records its nonmonetary items at historical cost. Which of the following is the correct presentation of this transaction on XYZ Company's balance sheet?
- A. €10,000 €27,500
- B. €10,000 €25,000
- C. €12,000 €25,000
- D. €12,000 €27,500
Answer: C
Explanation:
At the balance sheet date, monetary items are reported at the closing rate, which is often the spot rate on the balance sheet date. Nonmonetary items measured at historical cost reported at the rate on the transaction date. Thus, the pounds are reported at €12.0001.20
€/￡ x €10,000), and the land is reported at €25,000.
NEW QUESTION 34
At year-end, the entity has a book value per share of:
- A. US $10.00
- B. US $25.00
- C. US $15.00
- D. US $21.63
Answer: B
Explanation:
Book value per share based, on balance sheet amounts, measures the per share amount that would be received if the entry were liquidated. The ratio is calculated as ordinary equity divided by the number of outstanding shares.
The opening balance of ordinary shares was US $100,000. The opening balance of ordinary earning was US $82,500. The entity had 10,000 ordinary shares outstanding all year. No dividends were paid during the year.
NEW QUESTION 35
An internal auditor observed that the organization's disaster recovery solution will make use of a code site in a town several miles away Which of the following is likely to be a characteristic of this disaster recovery solution?
- A. Servers are not available and need to be procured
- B. Recovery resources and data restore processes have not been defined
- C. Data is synchronized in real lime
- D. Recovery time is expected to be less than one week
Answer: A
NEW QUESTION 36
The economic reasoning dictating that each nation specialize in the production of goods that it produces relatively more efficiently than other nations and import those goods that are produced relatively more efficiently by other nations is called the doctrine of:
- A. Diminishing returns.
- B. Comparative advantage.
- C. Relative competition.
- D. Efficient trade.
Answer: B
Explanation:
The doctrine of comparative advantage relates to comparative costs within one country. It holds that a country should produce those products in which it has a comparative advantage, not necessarily those products in which it has an absolute advantage. The doctrine suggests that a country should produce those products for which the greatest efficiencies are attainable even if it could also produce other goods more efficiently than another nation. In the long run, importing a product in which a country has an absolute advantage but not a comparative advantage will result in an overall increase in global production.
NEW QUESTION 37
Which of the following application-based controls is an example of a programmed edit check?
- A. Input error correction.
- B. Authorization for access.
- C. Reasonableness check.
- D. Transaction log.
Answer: C
NEW QUESTION 38
What is the number of production runs per year of computer chairs that would minimize the sum of carrying and setup costs for the coming year?
- A. 0
- B. 1
- C. 2
- D. 3
Answer: D
Explanation:
The EOQ minimizes the sum of carrying and setup costs. The EOQ is the amount at which carrying costs are equal to setup casts. Thus, plugging the data into the EOQ formula results in the following:
Thus, if each lot consists of 1,000 units, five production runs per year are needed to meet the 5,000-unit demand. At this level, setup costs will total US $5,000 5 x $1,000). Carrying costs will also equal US $5,000 10 per unit carrying cost average inventory of 500 units).
Accordingly, total costs are minimized at US $10,000. Jed Ryerson Computer Furniture, Inc. RCF) manufactures a line of office computer chairs. The annual demand for the chairs is estimated to be 5,000 units. The annual cost tic. hold one unit in inventory is US $10 per year, and the cost to initiate a production run is US $1,000. There are no computer chairs on hand, and RCF has scheduled four equal production runs of computer chairs for the coming year, the first of which is to be run immediately. RCF has 250 business days per year, sales occur uniformly throughout the year, and production start-up is within one day. RCF is considering using the following formula for determining the economic order quantity EOQ):
If: A = cast to initiate a production run per purchase order D = annual unit demand K = cost of carrying one unit per year
NEW QUESTION 39
On January 31, Year 3, a company prepaid the US $72,000 rental fee for a parking lot it leases. The rental fee covered a 3-year period beginning February 1, Year 3. What is the effect of this transaction on the December 31 Year 3, financial statements for each of the following?
- A. Option B
- B. Option C
- C. Option A
- D. Option D
Answer: A
Explanation:
The US $72,000 rental fee should be recognized as expense evenly over the 36-month duration of the lease. In Year 3, US $22,000 should be deferred to current expenses [(US $72,000 36 months) x 11 months], and US $50,000 should be deferred as prepaid expense. On January 1. a new landscaping firm. Bandit Co. acquired a fleet of vehicles, all the necessary tools and equipment. and a parking and storage facility. It began operations immediately. It is now the end of the first year of operations, and the first set of year-end financial statements are being prepared decisions have to be made regarding the appropriate accounting and reporting practices for this company. Relevant information for several of these items is described in the following list of transactions and events: At year-end the parking and storage facility that was purchased for US $150.000 has a fair value of US $250.000 The physical flow of inventory is first in, first out, and the cost of materials has risen steadily over the year. To promote sales for the coming year, maintenance contracts were sold in December at very reasonable prices, provided that the customers paid cash. On April 1, the company arranged a US $100,000 10% bank loan. Interest payments of US $5,000 are due on October 1 and April 1 of each year during the 5-year term of the loan. During the first year of operations, the company experienced a 5% bad debt rate on credit sales None of the bad debts are expected to be recovered, given that 5% i s the industry average level of bad debts. Total credit sales for the year were U $400,000. The year-end balance of accounts receivable includes uncollected overdue accounts of US $100,000. Half of the uncollected overdue amounts are estimated to be uncollectible.
NEW QUESTION 40
A characteristic of the payback method before taxes) is that it:
- A. Neglects total project profitability.
- B. Uses the estimated expected life of the asset in the denominator of the calculation.
- C. Incorporates the time value of money.
- D. Uses accrual accounting inflows in the numerator of the calculation.
Answer: A
Explanation:
The, payback method calculates the number of years required to complete the return of the original investment. This measure is computed by dividing the net investment required by the average expected cash flow to he generated, resulting in the number of years required to recover the original investment. Payback is easy to calculate but has two principal problems: it ignores the time value of money, and it gives no consider t, -,n to returns after the payback period. Thus, it ignores total project profitability.
NEW QUESTION 41
All of the following are true with regard to the first-in, first-out inventory valuation method except:
- A. It approximates the physical flow of goods.
- B. It values inventory close to current replacement cost.
- C. It generates the highest profit when prices are rising.
- D. It minimizes current-period income taxes.
Answer: D
NEW QUESTION 42
An entity that sprays chemicals in residences to eliminate or prevent infestation of insects requires that customers prepay for 3 months' service at the beginning of each new quarter. Select the term that appropriately describes this situation from the viewpoint of the entity.
- A. Earned income.
- B. Accrued income.
- C. Deferred income.
- D. Prepaid expense.
Answer: C
Explanation:
The prepayment does not meet the income recognition criteria the future inflow of economic benefits is not sufficiently certain given that the entity has not done what is required to be entitled to those benefits. Thus, the amount received in advance is considered a liability deferred income) because it represents an obligation to perform a service in the future an outflow of economic benefits) arising from a past transaction.
NEW QUESTION 43
The proper classification of noncurrent obligations scheduled to mature within 12 months of the balance sheet date but that are expected to be refinanced on a long-term basis should be to:
- A. Exclude all such obligations from the current liabilities classification.
- B. Include in the current liabilities classification those obligations that have actually been refinanced on a long-term basis after the balance sheet date but before the financial statements are authorized to be issued.
- C. Exclude from the current liabilities classification those obligations management wishes to exclude because they intended to convert them to long-term obligations.
- D. Exclude from the current liabilities classification those obligations that have been refinanced on a long-term basis after the balance sheet date but before the financial statements are authorized to be issued.
Answer: B
Explanation:
A liability is classified as current if1) it is expected to be settled with the normal operating cycle of the entity, 2) it is held primarily for trading.3) it is due within 12 months of the balance sheet date, and R) the entity has no unconditional right to defer payment for at least 12 months after the balance sheet date, All other liabilities are noncurrent IRS 1).
NEW QUESTION 44
Which of the following is a major advantage of decentralized organizations, compared to centralized organizations?
- A. Decentralized organizations streamline organizational structure.
- B. Decentralized organizations tend to be more responsive to market changes.
- C. Decentralized organizations are more focused on organizational goals.
- D. Decentralized organizations tend to be less expensive to operate.
Answer: B
NEW QUESTION 45
Which of the following is an example of a physical control?
- A. Establishing a physical security policy and promoting it throughout the organization.
- B. Providing fire detection and suppression equipment.
- C. Performing business continuity and disaster recovery planning.
- D. Keeping an offsite backup of the organization's critical data.
Answer: A
NEW QUESTION 46
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Understanding IIA CIA Part 3 Exam Topics
- Information security (25%)
- Business acumen (35%)
- Information technology (20%)
- Financial management (20%)
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